ASBFEO calls for payment times to be legislated

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) has released its final report on payment times, calling on the government to introduce legislation that will set a maximum payment time for big businesses to pay their small business suppliers.

Tax&Compliance Lara Bullock13 April 2017

Yesterday the ASBFEO's Payment Times Final Report was released based on findings from the Inquiry into Payment Times and Practices in Australia.

The inquiry found that Australian and multinational companies are increasingly delaying or extending payments to their suppliers from 30 days to 45, 60, 90 or 120 days.

“Extending payment times for suppliers effectively uses the businesses in the supply chain as a cheap form of finance. Something must be done. Small business should never have to act as a bank for big business, helping to finance multinational companies,” said Kate Carnell, the ombudsman.

“This growing trend for extended payment times impacts the economy by slowing down the flow of cash through supply chains, which limits growth of businesses because they have more capital tied up in financing their operations and it raises the costs for businesses financing longer trade credit to their suppliers."

The report made a number of key recommendations, most importantly that the Australian government introduce legislation to set a maximum payment time for business-to-business transactions.

Recommendations also include the Australian government adopt a 15-business-working-day limit on payment terms from July 2018, and the Australian government introduce legislation for large businesses to disclose publicly all of their payment terms and performance against those terms.

Small Business Minister Michael McCormack welcomed the ASBFEO report and said the government will take the necessary time to review it, noting the importance of cash flow for small businesses.

“I will be taking some time to review this report, however I am very focused on making sure small businesses can negotiate fair payment terms and that these terms are met,” Mr McCormack said.

“Sixty, 90 and 120 days are not good enough. Small business should not be used as [a] big business’ bank. My message to big business is clear – negotiate fair terms and stick to those terms.”

Mr McCormack confirmed that the government’s response to the report will be released in the near future.